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AstraZeneca has cancelled plans for a £450mn UK vaccine manufacturing plant after months of wrangling with British officials about state support for the project, in a major blow to Prime Minister Sir Keir Starmer’s government.
UK officials put forward a revised offer of financial support for the site close to Liverpool this month that was significantly higher than the £40mn offered last year, according to people familiar with the matter.
Starmer’s Labour government had initially sought last summer to reduce the amount of public money provided to the project in Speke from about £90mn to £40mn.
“Following protracted discussions with the government, we are no longer pursuing our planned investment at Speke,” AstraZeneca said in a statement on Friday.
“Several factors have influenced this decision including the timing and reduction of the final offer compared to the previous government’s proposal.”
The new plant was going to make the next generation of flu vaccines and help the UK be more resilient in future pandemics.
The existing Speke site will continue to produce and supply a flu vaccine, said AstraZeneca, the largest UK-listed company by market capitalisation.
The decision comes just days after chancellor Rachel Reeves sought to position the UK as a highly attractive place for life science companies to invest in a major speech on growth.
Starmer and Reeves have faced criticism from business for their £40bn tax-raising Budget last year and other measures including stronger worker rights, which executives have warned will make the UK a less attractive place to invest.
The UK’s previous offer to the pharmaceutical group under former Conservative chancellor Jeremy Hunt included up to £70mn in grants to develop an existing AstraZeneca vaccine facility at Speke, as well as £20mn in research and development support from the UK Health Security Agency.
Hunt, who announced the deal to great fanfare in March of last year, told the Financial Times that AstraZeneca’s decision was a “massive own goal by the government”.
“Manufacturing high-end vaccines is a huge opportunity for us to move away from over-dependence on the R&D part of the value chain,” he said. “I intervened personally to get this deal over the line in 2023 and am mortified the government has dropped the ball on it.”
The Treasury said: “A change in the make-up of the investment originally proposed by AstraZeneca led to a reduced government grant offer being put forward. All government grant funding has to demonstrate value for the taxpayer and unfortunately, despite extensive work from government officials, it has not been possible to achieve a solution.”
It added: “AstraZeneca remains closely engaged with the government’s work to develop our new industrial strategy.”
One person with knowledge of the relationship said that AstraZeneca had become “deeply frustrated” with the government, with Speke just one point of tension in a wider industry clash over drug prices and the future of life sciences investment.
People close to the pharmaceuticals group said it was looking at other possible international manufacturing sites for its new vaccine plant now that it has abandoned the Speke plan.
A person close to AstraZeneca said the company could look to relocate the project to Philadelphia where it already manufactures the company’s nasal vaccine for influenza.
In November, AstraZeneca said it planned to invest $3.5bn in research and development and manufacturing in the US, the world’s largest pharmaceutical market, which generates 44 per cent of the company’s sales.
AstraZeneca’s chief executive Pascal Soriot said at the time that the investment reflected “the attractiveness of the business environment together with the quality of talent and innovation capabilities”.
The company is also planning a $1.5bn manufacturing facility in Singapore, and last week pledged a $560mn investment in Canada.
People with knowledge of the business said its decision on the Speke facility would not affect any of AstraZeneca’s other investments in the UK.
The Speke decision comes at a time when the US is offering very attractive perks to companies planning to invest in manufacturing, including through state infrastructure investment, and loans and grants for research and development.
President Donald Trump has called on “every business in the world” to “come make your product in America”.
“We will give you among the lowest taxes of any nation on Earth,” Trump said in a video stream at the World Economic Forum in Davos last week. “But if you don’t make your product in America, which is your prerogative, then, very simply, you will have to pay a tariff.”
Trump has said he wants to cut corporation tax from 21 per cent to 15 per cent.
